The BSE Sensex is back to the levels prevailing before Narendra Modi took over as Prime Minister and the rupee is close to its all-time lows in 2013. True, most commentators have already said this is a great opportunity to continue to stay invested in the equity markets and continue making steady investments as usual.
But, will the investor rough it out this time? We have examples of past crises where investors who stayed the course reaped the benefits even as the markets continued on its short-term wayward path. After all, the market eventually resumes its upward sloping path in the long run. While the virtues of staying and continuing investments or even increasing investments in equity in these 'bad times' has been oft-repeated, but investors have seldom taken this advice seriously. Things, however, seem to be different this time. This is reflected in the relative calm with which the 20 per cent drop from the peak reached in March 2015 has been absorbed by retail investors.
So, what has changed so much between 2013 and now?
For one, retail (small) investors have realised the folly of trying to "get rich quick" by trying their hands at investing in stocks directly. They have started investing through the transparent equity mutual fund route and, more importantly, through the systematic investment plan (SIP) route. Close to 8.6 million SIPs are being executed every month. This is a phenomenal number.
The true test, however, will come soon. If the market continues its southward journey, whether investors see it as an opportunity or reason to panic. I am sticking my neck out, but I feel the retail investors will not panic even if the index drops further from hereon.
